beating the market: the first step
I’ve never studied psychology. It was never a compulsary subject at school and I never picked a psychology subject at uni. Yet I, we, use it every day of our lives in making decisions on what to eat, what to drink, what to say, when to go, when to stop, when to buy, when to sell. Whether we like it or not, some external influence pops into our head and invokes some emotion - love, kindness, pity, resentment, guilt, loathing, greed, and most infamous of all, fear. Our daily lives are built around actions resulting from invoked emotions. Of course, the stockmarket is no exception. The markets feed us with so many external factors to consider, each invoking at least one of our primal emotions: greed or fear. We are influenced.
Influence is a powerful thing, but even more powerful is the knowledge that you are being influenced. Once you know you are being influenced, you can train yourself to follow your intuitive response, or repel it. You can react intuitively, or you can react counter-intuitively. Or put it another way - you can react instinctively, or you can react purposefully. Purposefully: with purpose, resolve, direction - however you want to call it - is so much more useful than acting on instinct. Of course your purposeful reaction may be exactly the same as your instinctive reaction, but the key difference is that you are doing it with conscious resolve.
What a skill to buy a stock with perfectly good fundamentals from fearful sellers at stupidly low prices in a panic driven sell down, and what a skill to sell to those buying at super high prices for fear of not getting back in before it goes even higher! To pick these sweet spots is another story altogether, but I believe that knowing it is possible by being purposeful and not instinctive is the first baby step to beating the market.
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